Setback in US fiscal talks rattles shares, euro

Updated 22 December 2012
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Setback in US fiscal talks rattles shares, euro

NEW YORK: Global stock markets fell yesterday, pushed lower by a drop on Wall Street, and the euro and oil prices also slipped as a new setback in talks to avert a US fiscal crisis and weak data out of Europe put investors on edge.
A proposal from Republican leader John Boehner to avoid the so-called fiscal cliff failed to get support from his party late Thursday, casting fresh uncertainty over negotiations to avoid automatic tax hikes and spending cuts in January that could push the US economy back into recession.
The three major US equity indices were off about 1 percent, with the markets also weighed down by a poor reading of consumer confidence.
Thomson Reuters/University of Michigan Surveys of Consumers' final December consumer sentiment index fell to 72.9 from 74.5 in a preliminary report. Economists in a Reuters survey expected a final December reading of 74.7.
"The markets are becoming extremely nervous as time is running out for any compromise solution" in US fiscal negotiations, said Boris Schlossberg, managing director of FX strategy at BK Asset Management in New York.
"The greatest fear among investors is that the sudden shock to US aggregate demand caused by the automatic sequestration of government spending and the simultaneous hike in taxes could have a chilling effect on global growth."
The Dow Jones Industrial Average was down 134.67 points, or 1.01 percent, at 13,177.05. The Standard & Poor's 500 Index was down 15.29 points, or 1.06 percent, at 1,428.40. The Nasdaq Composite Index was down 35.47 points, or 1.16 percent, at 3,014.92.
Adding to anxiety were weaker-than-expected data from key corners of Europe, as German consumer morale dropped to its lowest in more than a year, Britain revised growth figures lower
and Sweden slashed its economic forecasts.
The euro fell 0.51 percent to $1.3175. The combined worries prompted widespread selling in most major stock markets and led investors to safe-haven assets.
The dollar and yen and US and German Government bonds all rose as declines on equity markets in London, Paris and Frankfurt compounded tumbles in Asia. MSCI's all-country global equity index fell 0.91 percent to 339.48.
The FTSEurofirst 300 of leading European shares fell 0.39 percent to 1138.30.
At a news conference, Boehner said it was up to President Barack Obama and fellow Democrats in Congress to reach a solution on the fiscal cliff.
Bickering US politicians have only 10 days left to resolve their differences. Most observers are still assuming the two sides will avert a fiscal disaster but tensions are likely to intensify over the normally quiet holiday period as the deadline looms.
"The markets are likely to interpret this as signaling even tougher negotiations in coming days," Mohamed El-Erian, chief executive of bond giant PIMCO, told Reuters.
Oil was also caught up in the US disappointment. Brent crude oil fell $1.17 to $109.03 per barrel, while US oil futures fell $1.61 to $88.52.
The benchmark 10-year US Treasury note rose 14/32 in price to yield 1.751 percent.
Asian markets mostly fell yesterday. Tokyo fell 0.99 percent, or 99.27 points to 9,940.06, Seoul shed 0.95 percent, or 19.08 points, to 1,980.42 and Sydney was 0.23 percent lower, losing 10.5 points to end at 4,623.6.
Hong Kong slid 0.68 percent, fell 153.49 points to close at 22,506.29, while Shanghai lost 0.69 p Taipei fell 0.99 percent, or 75.53 points, to 7,519.93.
Taiwan Semiconductor Manufacturing Co. was 1.25 percent lower at Tw$94.8 while leading smartphone maker HTC rose 1.63 percent to Tw$280.0.
Manila closed 0.45 percent higher, adding 26.20 points to 5,823.94. Metropolitan Bank and Trust rose 2.06 percent to 101.70 pesos and Philippine Long Distance Telephone gained 1.18 percent to 2,570 pesos.
Wellington fell 0.51 percent, or 20.71 points, to 4,054.74.
Air New Zealand was down 0.78 percent at NZ$1.28, Fletcher Building shed 2.37 percent to NZ$8.25 and Telecom eased 2.59 percent to NZ$2.26.
Singapore closed up 0.54 percent, or 16.95 points, at 3,175.52.
Singapore Telecom rose 0.60 percent to Sg$3.37 and DBS Group gained 0.54 percent to Sg$14.99.
Jakarta ended down 21.04 points, or 0.49 percent, at 4,254.82.
Kuala Lumpur shares gained 4.96 points, or 0.30 percent, to close at 1,670.60.
Mumbai fell 1.09 percent or 211.92 points at 19,242.0 points.


Wealthy Gulf individuals feel more confident about regional prospects

Updated 47 min 1 sec ago
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Wealthy Gulf individuals feel more confident about regional prospects

  • “Factors like the region’s stability, attractive investment opportunities and low-tax environment are seen as the main drivers behind the growing confidence in the region’s economy.”
  • Among the most optimistic were respondents in the UAE, with 57 percent of those surveyed saying they thought the overall outlook was improving.

DUBAI: Survey finds growing optimism on region’s economies, but Saudi investors remain wary.

Wealthy individuals in the Gulf are more optimistic over the future of the region and the global economy compared with last year, and are increasing likely to invest in their own countries and other emerging markets in Asia than in western economies. These are among the main findings of an annual survey by Dubai-based Emirates Investment Bank (EIB), released on Tuesday, of the sentiment among high net worth individuals (HNWIs) in the region. 

After two years of falling confidence, some 60 percent of regional HNWIs now believe things will improve or stay the same. Fewer are pessimistic about both regional and global economic prospects than last year, while nearly 80 percent of respondents said they would prefer to invest in Gulf assets, rather than looking abroad.

The recovering oil price was a big reason for the increasing feel-good factor in the Gulf, according to Khalid Sifri, EIB’s chief executive officer, who added: “Factors like the region’s stability, attractive investment opportunities and low-tax environment are seen as the main drivers behind the growing confidence in the region’s economy.”

After falling below $30 per barrel in early 2016, oil has subsequently recovered to a three-and-a-half-year high, breaching the $75 a barrel mark yesterday for the first time since November 2014.

However, the overall optimism of the survey masks some concerns among regional HNWIs; in Saudi Arabia, 48 percent of respondents said that they saw the regional economic situation improving or staying the same, against 52 percent who felt it was likely to worsen in 2018.The survey was conducted last November and December, when investor sentiment in the Kingdom was affected by the high-profile anti-corruption campaign undertaken against some prominent business people accused of financial wrong-doing. “It may have been affected by that. We shall see what the situation is at the end of this year,” Sifri said. 

Respondents from Kuwait were even more pessimistic. None of the respondents from the country felt that things were going to improve on the investment front this year, while 54 percent said they would worsen. Among the most optimistic were respondents in the UAE, with 57 percent of those surveyed saying they thought the overall outlook was improving. On the long-term global outlook, a total of 78 percent of those surveyed across the region were optimistic about prospects over the next five years, with most citing positive economic and political stability as the reason, along with a smaller number who said oil price stabilization would benefit the world economy. The oil price recovery was the biggest reason for regional optimism. 

The geopolitics of the region was claimed as a big factor in deciding investment decisions, but Saudis were less concerned than others. Only 29 percent in the Kingdom said they were influenced by geo-political events, compared with 83 percent in Qatar and 85 percent in the UAE. 

Oil prices, economic reforms and the introduction of VAT were also factors influencing investment, as was the election of Donald Trump as president of the USA. There has been a big shift in global investor orientation outside the GCC. Nearly half of regional wealthy investors (47 percent) are now looking to Asia, 38 percent to the wider Middle East and North Africa, some 34 percent to Europe and only 17 percent to North America. The survey was conducted among 100 HNWIs with $2 million or more in investable assets.